e.l.f. Beauty Conference Call Summary Company Overview - **Company**: e.l.f. Beauty (NYSE: ELF) - **Industry**: Beauty and Cosmetics - **Key Brands**: e.l.f. Cosmetics, e.l.f. SKIN, Naturium, rhode Core Points and Arguments Market Position and Growth - e.l.f. Beauty is the number one brand by unit share in U.S. color cosmetics and has three of the fastest-growing skincare brands [1][2] - The company has achieved a **23% CAGR** in net sales over the last decade, significantly outpacing the beauty industry's **4% CAGR** [9] - e.l.f. has gained **800 basis points** of market share over the last five years, while the top ten mass color cosmetics brands have lost **30 basis points** [10] - The company has delivered **28 consecutive quarters** of net sales growth, showcasing its consistent performance [9] Brand Portfolio and Acquisitions - The e.l.f. brand portfolio includes: - e.l.f. Cosmetics: Number one unit share brand - e.l.f. SKIN: Number 11 mass skincare brand, growing at more than twice the category growth rate - Naturium: Number 5 masstige brand, growing significantly - rhode: Acquired in August, now the number one brand at Sephora North America [7][8] Competitive Advantages - e.l.f. Beauty emphasizes its **core value proposition** of providing high-quality products at accessible prices, appealing to a broad demographic including Gen Z, Gen Alpha, and Millennials [12] - The company has a **hybrid manufacturing model** that combines asset-light manufacturing with deep expertise, allowing for quality, cost, and speed advantages [26] - e.l.f. has built a **disruptive marketing engine** that connects with its community across various platforms, including TikTok and Twitch, enhancing brand engagement [30][31] Financial Performance - e.l.f. has raised its outlook for net sales growth to **22%-23%** for the current year, significantly above the average of **4%** for public consumer companies [15] - The company has improved its gross margin from **41%** to an expected **70%**, allowing for reinvestment in marketing and growth initiatives [64] White Space Opportunities - e.l.f. aims to **double its net sales** across cosmetics, skincare, and international markets in the coming years [66] - In color cosmetics, e.l.f. holds a **13% market share** and aims to become the number one dollar share brand [66] - The skincare segment has grown to represent **20%** of the business, with plans for further distribution and innovation [68] - International sales currently account for **20%** of net sales, with a goal to increase this to match global peers at **70%** [70] Additional Insights - e.l.f. has a strong commitment to diversity, with **71%** of its team being women and **43%** diverse, reflecting the communities it serves [14][15] - The company has successfully created a **connected commerce ecosystem** that integrates content, community, and commerce, enhancing customer engagement [31] - e.l.f. products are sold at a rate of **nine products per second**, making it the most unit brand in its category [61] This summary encapsulates the key points from the e.l.f. Beauty conference call, highlighting the company's strong market position, growth strategies, competitive advantages, and future opportunities.

Core Viewpoint - e.l.f. Beauty Inc. is identified as a high-risk, high-reward growth stock, with recent adjustments to its target price reflecting a cautious outlook on future revenue growth despite strong current performance [1][5]. Financial Performance - e.l.f. Beauty reported a 38% year-over-year growth in net sales for Q3-FY2026, primarily driven by the successful launch of its "rhode" brand, which contributed 36 percentage points to this growth [2]. - The remaining 2 percentage points of growth were attributed to price increases in existing product lines, indicating a lack of organic volume growth [2]. Future Guidance - The company has revised its full-year net sales guidance to a range of $1,600 million to $1,612 million, up from the initial outlook of $1,550 million to $1,570 million, representing an expected average growth of 18.0% to 19.5% year-over-year for the fiscal year [3]. - e.l.f. anticipates that the "rhode" brand will contribute approximately $260 million to $265 million in revenue [3].

Core Insights - e.l.f. Beauty, Inc. reported a 38% increase in quarterly net sales, reaching $489.5 million, driven by growth in retailer and e-commerce channels both in the US and internationally [1][3] - The company's gross margin declined by approximately 30 basis points to 71%, primarily due to increased tariff costs, although this was somewhat offset by pricing and product mix benefits [2] - e.l.f. Beauty raised its FY 2026 outlook, expecting net sales growth of approximately 22% to 23% year-over-year, up from a previous estimate of 18% to 20%, with Rhode expected to contribute around $260 million to $265 million in net sales for FY 2026, an increase from the prior expectation of $200 million [3] Analyst Ratings - JPMorgan analyst Andrea Teixeira increased the price target for e.l.f. Beauty shares to $105 from $103 while maintaining an "Overweight" rating [4]

Investment Rating - The report maintains a positive outlook on e.l.f. Beauty, raising the full-year net sales growth guidance from 18%-20% to 22%-23% due to the strong contribution from the Rhode acquisition [2][9]. Core Insights - e.l.f. Beauty achieved a 38% year-over-year increase in net sales for FY26Q3, reaching $489.5 million, with the Rhode acquisition contributing approximately $128 million [2][9]. - The core organic net sales growth was only about 2%, which is below expectations, primarily due to short-term softness in key international markets like the UK and Germany [2][9]. - The company has adjusted its global consumption growth expectation down to 6% from 8%, reflecting a marginal weakening in the broader consumer environment [2][9]. - The adjusted EBITDA rose by 79% to $123 million, representing 25% of net sales, indicating strong operational performance [2][9]. Performance Summary - e.l.f. Beauty has achieved year-over-year net sales growth for 28 consecutive quarters, positioning it among the few publicly-listed companies in the consumer sector capable of sustaining such prolonged high growth [2][9]. - The strong performance is driven by an excellent brand portfolio strategy, particularly the significant contribution from Rhode, alongside organic growth from the core business through a value proposition of premium quality at accessible pricing [2][9]. Cost Structure and Profitability - The gross margin in FY26Q3 decreased by 30 basis points to 71%, mainly due to higher tariff costs, partially offset by pricing and product mix optimization [3][10]. - The ratio of selling, general, and administrative (SG&A) expenses to net sales declined from 54% to 51%, benefiting from improved marketing spend efficiency [3][10]. - Marketing and digital investment as a percentage of net sales decreased from 27% to 21%, but is expected to rebound to around 27% in the second half of the fiscal year due to increased investment in major brand campaigns [3][10]. Brand Performance - The e.l.f. Cosmetics brand saw an 8% year-over-year increase in U.S. consumption, significantly outpacing the overall color cosmetics category growth of 4% [4][11]. - The company has established a dominant 22% market share in the face makeup segment, with significant growth potential remaining in lip and eye categories [4][11]. - Acquired brands like Rhode have achieved record launches in Sephora, and Naturium and e.l.f. SKIN have outperformed the overall U.S. skincare category growth [4][11]. Innovation and Marketing - e.l.f. continues to drive product innovation through community insights, with new products priced competitively against high-end counterparts [5][12]. - Breakthrough marketing campaigns have generated over 4 billion impressions, showcasing the company's effective marketing strategies [5][12]. International Market Potential - International sales currently account for approximately 20% of total sales, indicating substantial growth potential compared to the industry average of over 70% [6][13]. - The company has established a comprehensive distribution network in Germany and is expanding its presence in premium markets like Australia/New Zealand with the Rhode brand [6][13].

Core Viewpoint - E.l.f. Beauty's stock experienced a significant reversal despite strong fiscal Q3 results, presenting a potential buying opportunity for investors [1]. Financial Performance - E.l.f. Beauty reported a 38% year-over-year increase in sales for fiscal Q3, reaching $489.5 million, surpassing the analyst consensus of $460 million [3]. - Adjusted earnings per share (EPS) rose 68% from $0.74 to $1.24, exceeding the analyst consensus of $0.72 [3]. - Adjusted EBITDA increased by 79% to $123 million [3]. Market Position and Growth - The company achieved a gross margin of 65.91% and organic growth, excluding the acquisition of Rhode, was 2% [5]. - Total consumption grew by 6%, with an 8% increase in the U.S. market [5]. - E.l.f.'s namesake brand gained 130 basis points in market share within the mass cosmetics sector during the quarter [5]. Revenue Breakdown - U.S. revenue increased by 36%, while international revenue rose by 44%, although weak consumption was noted in the U.K. [6]. - Rhode contributed $128 million in revenue for the quarter, aided by its launch at Sephora [5]. Future Outlook - E.l.f. raised its full-year fiscal 2026 guidance, now expecting sales growth of 22% to 33%, up from a previous estimate of 18% to 20% [6]. - Updated fiscal 2025 outlook includes net sales of $1.6 billion to $1.612 billion, adjusted EBITDA of $323 million to $326 million, and adjusted EPS of $3.05 to $3.10 [7]. Expansion Plans - The company plans to launch Rhode in Australia and New Zealand and introduce its Naturium brand into Walmart in the U.S. this spring [8]. - E.l.f. will also increase shelf space for its brand at Ulta Beauty and launch at DM in Germany [8]. Investment Consideration - E.l.f. is currently trading at a forward price-to-earnings ratio of 22 and a price/earnings-to-growth (PEG) ratio of 0.4, indicating it may be undervalued [10].

Financial Data and Key Metrics Changes - In Q3, the company achieved a net sales growth of 38% year-over-year and an adjusted EBITDA growth of 79% [3][29] - The Q3 net sales growth was supported by the acquisition of Rhode, which contributed approximately $128 million, or about 36 percentage points, to the growth [29] - Adjusted net income for Q3 was $74 million, or $1.24 per diluted share, compared to $43 million, or $0.74 per diluted share a year ago [31] Business Line Data and Key Metrics Changes - The e.l.f. Cosmetics brand grew 8% in the U.S., outperforming the category by two times [3][4] - e.l.f. Skin consumption grew 16% in the U.S., also outperforming the category by two times [4] - Naturium, acquired two years ago, continues to drive strong growth, while Rhode achieved the No. 1 brand ranking in Sephora North America [4][26] Market Data and Key Metrics Changes - The company increased its market share by 130 basis points, the largest share gain among over 700 cosmetics brands tracked by Nielsen [4] - U.S. net sales grew 36% year-over-year, while international net sales grew 44% in Q3 [30] - International sales accounted for approximately 20% of net sales, compared to legacy peers with over 70% of their sales outside the U.S. [28] Company Strategy and Development Direction - The company aims to democratize access to beauty with a value proposition that offers products at accessible price points, with 75% of its portfolio priced at $10 or less [6][7] - The company plans to expand its retail presence, including launching Naturium in Walmart and increasing space within Ulta Beauty [25][28] - The marketing strategy includes disruptive campaigns and collaborations, such as the partnership with Liquid Death and H&M [12][15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue gaining market share and delivering growth, despite some softness in the UK and Germany [29][30] - The company raised its fiscal 2026 outlook for net sales growth to approximately 22%-23% year-over-year, up from 18%-20% previously, primarily driven by Rhode's outperformance [33][34] - Management noted that global consumption growth is expected to be around 6%, with some headwinds from pipeline dynamics [35][69] Other Important Information - The company ended the quarter with $197 million in cash, compared to $74 million a year ago, and repurchased approximately $50 million of its outstanding common stock [32] - The company plans to debut a commercial during the Super Bowl, aiming for a campaign reach of nearly 300 million [19] Q&A Session Summary Question: Can you unpack your approach to spending and guidance? - Management indicated that the adjusted EBITDA margin for the second half is expected to be around 19%, up from 17% previously, due to timing shifts in costs and increased marketing spend [41][42] Question: What is the path forward for Rhode's expansion? - Management emphasized the importance of maintaining quality in Rhode's launches and noted significant pent-up demand for the brand [43][44] Question: What are the plans for driving growth in the core e.l.f. brand? - Management highlighted the strategy of leveraging existing strengths and expanding shelf space, particularly in international markets [46][47] Question: Can you provide an update on the e.l.f. Cosmetics business in the U.S.? - Management reported that the e.l.f. brand is healthy, with a successful execution of a recent price increase and strong innovation pipeline for the spring [52][54] Question: What drove the decision to return to a Super Bowl ad this year? - Management explained that the marketing spend remains targeted at 24%-26% for the year, with a focus on timing shifts and additional campaigns planned for Q4 [80][81] Question: Can you clarify the full-year guidance and the implications for e.l.f. brand growth? - Management noted that the raised guidance reflects a lower expected growth for the e.l.f. brand due to a decrease in the global consumption rate [84][86]

Financial Data and Key Metrics Changes - In Q3, net sales grew by 38% year-over-year, with adjusted EBITDA increasing by 79% [3][29] - The acquisition of Rhode contributed approximately $128 million, or about 36 percentage points, to Q3 net sales growth [29] - Q3 gross margin was 71%, down approximately 30 basis points year-over-year but up 200 basis points sequentially from Q2 [30] - Adjusted net income was $74 million, or $1.24 per diluted share, compared to $43 million, or $0.74 per diluted share a year ago [31] Business Line Data and Key Metrics Changes - e.l.f. Cosmetics brand grew 8% in the U.S., outperforming the category by two times [3] - e.l.f. Skin consumption grew 16% in the U.S., also outperforming the category by two times [4] - Naturium, acquired two years ago, continues to drive strong growth, while Rhode achieved the No. 1 brand ranking in Sephora North America [4][26] Market Data and Key Metrics Changes - U.S. net sales grew by 36% year-over-year, while international net sales grew by 44% [30] - The company increased its market share by 130 basis points, the largest share gain among over 700 cosmetics brands tracked by Nielsen [4] - International sales account for approximately 20% of total net sales, compared to legacy peers with over 70% [28] Company Strategy and Development Direction - The company aims to democratize access to beauty with a value proposition that offers products at accessible price points [6] - Plans for spring 2026 include expanding retail space within Ulta Beauty in the U.S. and launching with DM in Germany [25] - The company is focused on innovation and disruptive marketing to fuel brand awareness and deepen community connections [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue gaining market share and delivering growth, despite some softness in the UK and Germany [29][30] - The outlook for fiscal 2026 has been raised, expecting net sales growth of approximately 22%-23% year-over-year, up from 18%-20% previously [33] - Management noted that global consumption growth is expected to be around 6%, with some headwinds from pipeline dynamics [35] Other Important Information - The company ended the quarter with $197 million in cash on hand, compared to $74 million a year ago [32] - The company repurchased approximately $50 million of outstanding common stock during the quarter [32] - The marketing spend for the quarter was 21% of net sales, down from 27% in Q3 of the previous year [31] Q&A Session Summary Question: Can you elaborate on your approach to spending and guidance? - Management indicated that the adjusted EBITDA margin for the second half is expected to be around 19%, up from 17% previously, due to timing shifts in costs and increased marketing spend [41][42] Question: What is the plan for expanding Rhode at a faster pace? - Management emphasized the importance of maintaining quality in launches rather than rushing expansion, noting strong demand for Rhode [43][44] Question: What strategies are in place to drive growth for the core e.l.f. brand? - Management highlighted the importance of innovation and market share gains, noting that the brand is the most productive in terms of sales per linear foot [46][47] Question: Can you provide an update on the base e.l.f. Cosmetics business in the U.S.? - Management reported that the brand is healthy, with a successful price increase and strong consumer acceptance [52][53] Question: What are the plans for innovation and portfolio around Rhode in the U.S.? - Management mentioned ongoing innovation efforts, including new product launches and a focus on maintaining momentum [55][56]

Financial Data and Key Metrics Changes - In Q3 2026, net sales grew by 38% year-over-year, with adjusted EBITDA increasing by 79% [2][23] - The company achieved its 28th consecutive quarter of net sales growth, a rare feat among public consumer companies [2] - Q3 gross margin was 71%, down approximately 30 basis points year-over-year but up 200 basis points sequentially from Q2 [24][25] - Adjusted net income was $74 million, or $1.24 per diluted share, compared to $43 million, or $0.74 per diluted share a year ago [25] Business Line Data and Key Metrics Changes - e.l.f. Cosmetics brand grew 8% in the U.S., outperforming the category by two times [2] - e.l.f. Skin consumption grew 16% in the U.S., also outperforming the category by two times [3] - The acquisition of Rhode contributed approximately $128 million to Q3 net sales growth, accounting for about 36 percentage points [23] Market Data and Key Metrics Changes - U.S. net sales grew 36% year-over-year, while international net sales grew 44% [24] - The company increased its market share by 130 basis points, the largest share gain among over 700 cosmetics brands tracked by Nielsen [3] - International sales accounted for approximately 20% of Rhode's direct-to-consumer sales, with 74% of the brand's social followers from outside the U.S. [21] Company Strategy and Development Direction - The company aims to democratize access to beauty with accessible price points, with 75% of its product portfolio priced at $10 or less [4][5] - e.l.f. plans to expand its retail presence, including launching Naturium in Walmart and increasing space in Ulta Beauty [22][20] - The company is focused on innovation, with a community-led approach to product development and a strong marketing strategy [5][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue gaining market share and delivering growth, despite some softness in the UK and Germany [23][27] - The company raised its fiscal 2026 outlook for net sales growth to approximately 22%-23%, up from 18%-20% previously [27] - Management noted that global consumption growth is expected to be around 6%, with some headwinds from pipeline cycling [28][80] Other Important Information - The company repurchased approximately $50 million of its outstanding common stock during the quarter [26] - e.l.f. plans to debut a commercial during the Super Bowl, aiming for a campaign reach of nearly 300 million [17][74] - The company has seen strong consumer engagement and brand loyalty, with innovative products achieving significant market traction [14][49] Q&A Session Summary Question: Can you elaborate on your approach to spending and guidance? - Management explained that the adjusted EBITDA margin for the second half is expected to be around 19%, with some costs shifting from Q3 to Q4 due to increased marketing spend [35][36] Question: What is the strategy for expanding Rhode? - Management emphasized the importance of maintaining quality in Rhode's launches and highlighted the strong demand for the brand [37][38] Question: What are the plans for driving growth in the core e.l.f. brand? - Management stated that the strategy involves leveraging existing strengths and expanding shelf space, particularly in international markets [39][40] Question: How has the price increase affected consumer behavior? - Management reported that a 15% price increase resulted in only single-digit unit declines, indicating strong consumer acceptance [46] Question: What are the expectations for U.S. consumption in Q4? - Management indicated that U.S. consumption is expected to be above the global average, driven by strong brand performance [84]

Core Viewpoint - e.l.f Beauty, Inc. is recognized for its growth potential, with analysts divided on its future performance, highlighting both challenges and opportunities in the cosmetics market leading up to 2026 [1][2]. Group 1: Analyst Ratings and Price Targets - UBS has lowered its price target for e.l.f Beauty, Inc. to $98 from $105 while maintaining a Neutral rating, citing a challenging operating environment but potential fundamental improvements by 2026 [1]. - Jefferies initiated coverage of e.l.f Beauty, Inc. with a Buy rating and a price target of $110, emphasizing the company's confidence in the cosmetics cycle and consumer purchasing patterns [2]. Group 2: Company Overview - e.l.f Beauty, Inc. is a U.S.-based cosmetics and skincare company known for its affordable, clean, vegan, and cruelty-free products, which are sold globally [3]. - The company operates multiple brands, including e.l.f. Cosmetics, e.l.f. Skin, Well People, Keys Soulcare, and Naturium, targeting a broad consumer market through retail and e-commerce channels [3].

Core Insights - Estee Lauder Companies Inc. has seen a recovery in its skin care business, with first-quarter fiscal 2026 skin care sales increasing by 3% to $1,575 million, marking a turnaround from previous declines and contributing to overall sales growth [1][9] Sales Performance - The improvement in sales was primarily driven by share gains in the U.S. and Mainland China, with Estee Lauder reporting an 8% retail growth in the U.S. skin care market, outperforming the broader category's 6% growth [2][9] - Core brands La Mer and Estee Lauder benefited from a low prior-year base and a recovery in Asia travel retail, supporting the overall sales growth during the quarter [1] Profitability - Skin care operating income rose significantly, increasing by 60% year over year, attributed to higher sales and operational efficiencies from the Profit Recovery and Growth Plan [4][9] Strategic Initiatives - The company's "Beauty Reimagined" strategy has played a crucial role in supporting results, with new product launches in high-growth areas such as longevity-focused products and acne treatments, as well as expanded distribution through platforms like Amazon in Mexico and TikTok Shop [3] Market Challenges - Despite the positive results, challenges remain, particularly in global travel retail, which is described as a volatile channel, and consumer sentiment in Mainland China, which, while improving, is still below historical peaks [5] Competitor Landscape - Coty Inc. continues to face pressure in its skin care segment, reporting declines in prestige makeup and skincare sales, while e.l.f. Beauty is expanding its skin care presence, positioning it as a key growth driver with strong consumer engagement [6][7] Valuation and Estimates - Estee Lauder shares have gained 6.5% in the past month, outperforming the industry growth of 6% [8] - The company trades at a forward price-to-earnings ratio of 44.45X, higher than the industry average of 30.35X [10] - Zacks Consensus Estimate for Estee Lauder's fiscal 2026 and 2027 earnings has increased slightly, indicating positive market sentiment [11]